Posted on 15 Feb 2016
It said utilisation rates for jackup rigs in Southeast Asia have declined from the highs of close to 100% in early 2014 to current lows of nearly 60%.
In Malaysia, the utilisation rate of jackup rigs is 29% with 17 of 24 rigs either ready stacked or cold stacked.
Of the 43 rigs consisting jackups, tenders, semi-subs, drillships and semi-tenders currently in Malaysia, the total utilisation rate is 30%.
“We do not believe that this rate will post a meaningful increase in the near term as crude oil prices are still expected to stay subdued until at least the second half of this year,” MIDF said.
In contrast, rig utilisation rates globally and in Asia Pacific are 68% and 56% respectively. Within Southeast Asia, the utilisation rate for rigs is about 50%.
However, the rigs market in the Middle East is still relatively strong at 81%, which it believes could be due to higher rig standards required in the Middle East market, hence limiting the number of rigs eligible to enter the market there.
Apart from the lacklustre utilisation rates, MIDF said, day charter rates (DCR) for rigs have also been depressed in line with the downtrend in rig utilisation rates.
From a high of US$160,000-US$170,000 per day for jackup rigs back in Q2’14, DCRs have since nearly halved to current levels of US$80,000-US$90,000 (RM333,600-RM375,300) per day.
“At current price levels, we believe that most operators are still operating at a cash- positive level. Industry stakeholders are of the collective opinion that rates may stay sub-US$100,000 per day for an extended duration due to the glut in competitive rigs; glut in rigs under construction in fabrication yards; sharp pullback in offshore exploration activities; and relatively weak crude oil price,” it said.
Due to the weak indicators shrouding the rigs market, MIDF Research is adopting a cautious stance on rig owners and operators such as UMW Oil & Gas Bhd and Perisai Petroleum Teknologi Bhd.
“Given the volatile and relatively negative sentiment shrouding the upstream segment of oil and gas industry, we are recommending investors to cherry-pick stocks which are specific to the downstream segment of the industry,” said MIDF Research.
For exposure into Pengerang, it is recommending KNM Group Bhd, as Petronas via Petronas Chemicals Bhd has announced three petrochemical projects within the Pengerang Integrated Petroleum Complex, and KNM Group stands to be a beneficiary for the supply of specialised process equipment.
In addition, Malaysia Marine & Heavy Engineering Holdings Bhd offers investors trading opportunities as the company is also a front runner for pre-fabrication works in the Refinery and Petrochemical Integrated Development or Rapid project in Johor.
“For investors seeking exposure in a more predictable downstream company offering stable earnings, we are recommending Gas Malaysia Bhd as the adoption of the Incentive-Based Regulation regime will provide better earnings visibility and predictability,” said MIDF Research.
